Two cheap shares I’m planning on buying for my holdings when I next can are Pets At Home Group (LSE: PETS) and Somero Enterprises (LSE: SOM). Here’s why!
One-stop shop for pets
Pets At Home provides a number of services to help us look after our beloved pets. These include retail outlets and an online store for all the basics such as food. In addition to this, the business also owns and operates grooming salons and veterinary services.
Pets shares are up 18% over a 12-month period, from 265p at this time last year to current levels of 314p. However, since macroeconomic volatility began to impact markets, they’ve been heading downwards. They’ve dropped 20% from 397p in July to current levels.
An enticing valuation on a price-to-earnings ratio of 17 is one of the aspects that caught my eye to start with. Although not the lowest, Pets has excellent brand power and a wide reach that should help the business grow.
Speaking of growth, according to Statista, pet ownership in the UK is at all-time highs and only increasing. Pets At Home should benefit as pets need the same care, attention, and amenities that we do.
Next, Pets shares would boost my passive income as they offer a dividend yield of 4.1%. However, I’m conscious that dividends are never guaranteed.
One major risk of note is that continued volatility and a cost-of-living crisis may mean pet owners are only spending on basic essentials. Certain extras or luxuries may not be a possibility or a priority. This could hurt the firm’s performance and potential payouts, at least in the short term.
Overall, I reckon once volatility cools, Pets shares should head upwards. There’s an excellent buying opportunity right now as shares look cheaper than usual, if you ask me.
Laser focused
Somero Enterprises designs and sells laser-guided concrete laying devices for the construction industry. Hardly exciting I know, but nevertheless I can see how the product could be in high demand from a construction and infrastructure perspective going forward.
Somero shares have been on a downward trajectory for some time. Over a 12-month period they’ve slipped 22% from 375p at this point last year to current levels of 290p. They’ve also fallen 35% from February highs of 448p to current levels.
I can understand why Somero shares have been struggling. During times of economic turbulence, infrastructure projects can slow down and even get scrapped. This is a risk in the shorter term from an investment perspective.
However, I’m a long-term investor and I think the future is bright. One of the biggest ways to stimulate an economic recovery is to boost infrastructure through building. This could boost Somero shares. The US government passed a $1.2trn infrastructure bill in 2021 and this could eventually benefit Somero’s performance and shares.
With my belief that the longer-term outlook is potentially fruitful and that Somero shares look like a bargain today on a price-to-earnings ratio of 7.8.
I think Somero is a prime example of a stock that could provide short-term pain but longer-term gain and rewards.
